Originally posted 2010-01-08 09:00:00.
For this weeks Guest Post Friday here at Musings, we have our first three time guest poster. Scott Wolfe, Jr. (@scottwolfejr on Twitter) is a construction lawyer practicing in Washington, Oregon and Louisiana. He is the founding member of the bi-coastal construction law boutique practice, Wolfe Law Group. He is also the founder of Express Lien, a nationwide lien service that offers a free web-based preliminary notice and lien management software. Check out his great blogs on various areas of construction law.
Nearly everyone in the construction industry has heard the term “lien” thrown around on a project. Depending on the type of project being constructed, however, the lien-like remedies available to you may differ significantly.
This post discusses the types of lien or claim remedies available to contractors, suppliers and laborers on the three classes of construction projects: private, state and federal. This post discusses the concepts broadly, and does not focus on the law of any particular state. Remember that laws differ from state-to-state, and it’s important to consult the laws applicable to your project.
The Lien – Private Works
When you think of the term “lien,” you are likely thinking of the remedy available to unpaid parties on a private construction project.
In most states, when a party provides labor and/or materials to an improvement, and the party is not paid, the law allows that party to file a lien on the property itself and claim a privilege thereon (similar to a mortgage privilege held by a bank on mortgaged property).
This is the key difference between a private lien and a public claim. Unlike most public claims, a private lien actually gives the unpaid party a privilege upon the property. Most states then allow the lien claimant to bring a proceeding against the property owner to foreclose on the lien (and thus, the property).
To acquire this powerful privilege, many states require contractors to send pre-lien notices. The notice may be due before work begins or immediately thereafter, and other notices may be due immediately before filing the lien itself.
The first step to knowing the notice requirements in your state, however, is knowing the type of lien you’ll file on a project. It’s something you’ll want to understand from the start of your work.
Claims on State Projects
Most states do not allow “liens” to be taken against property owned by the state. Accordingly, the traditional “lien” that can be filed on a private work cannot be filed on a public work.
However, this does not leave unpaid contractors, suppliers and laborers without a remedy.
Normally, a state project will require the general contractor to post a bond in an amount sufficient to pay for the claims of all subcontractors, laborers and suppliers. In the event you’re unpaid on a state project, most states allow the unpaid party to file a claim against that bond.
Usually, this process is referred to as filing a claim, as opposed to filing a lien.
Three key things to keep in mind when working on a state project:
(1) Like a private lien, state projects may also require you to send pre-claim notices, so familiarize yourself with those requirements;
(2) Like a private lien, you will only have so long to assert your claim against the bond, so do it timely; and
(3) It’s important to know the name of the surety and the public entity in charge of the work, as you’ll be required to notify these parties of your claim. Have this information from the start of construction, or request it from the general (you’re entitled to know).
Claims on Federal Projects
Like property owned by the state, property owned by the federal government cannot be liened. Unpaid contractors, suppliers and laborers must bring a claim against the general contractor’s bond, through what is referred to as a “Miller Act Claim.”
To make a claim under the Miller Act, first tier subs and suppliers must bring suit against the bond within 1 year from last furnishing labor and/or materials, and must deliver notice to the owner and/or surety. Second tier subs and suppliers to first tier subs must deliver a Miller Act Notice to the prime contractor within 90 days from last furnishing labor and/or materials to the project, and a suit must be brought within 1 year of last furnishing labor and/or materials.
Again, as it is true with state projects, it’s important to know the name of the surety and the public entity in charge of the work. If it’s not provided to you, you can request it.
Regardless of what class of project you’re working on, a lien-like remedy is probably available to you in the event of non-payment. However, it’s critical to understand the different remedies available at the onset of construction, for each remedy carries different pre-lien or pre-claim requirements.